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China carbon tax may prompt US debate

China's potential carbon tax may spur US lawmakers to consider climate protection more seriously, according to a trader representative.

“China's announcement that it's considering a carbon tax may, over time, chill superficial resistance by some to the issue and spur US lawmakers to more seriously consider what the appropriate US actions should be on market-based climate policies,” Cameron Prell, the US working group chairman of the Climate Markets & Investment Association, a London-based industry group, said by phone.

China may introduce a tax on carbon dioxide emissions at some time, Xinhua reported February 19, citing a senior Finance Ministry official. The report was five days after Senators Barbara Boxer, a Democrat from California, and Bernie Sanders, an independent from Vermont, unveiled a climate change plan that would set an initial $US20-a-ton carbon fee on polluters, including manufacturers and oil and natural gas producers.

“It does appear that the carbon tax issue could play a significant role at the international level over the next few years,” said Prell, who is also senior counsel for climate and energy at McGuireWoods LLP in Washington. China may be “staking out” a position for the United Nations climate negotiations, which aim for some kind of new global deal by 2015, Prell said.

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US imports

Goods imported into the US might also be taxed under the Boxer-Sanders plan.

“To ensure that all countries play by the same rules, imported fuels and products would also be charged the same carbon fee that domestic fuels and products pay, unless the exporting nation has a similar climate program,” the senators said in a statement published on Sanders' website.

China's National Development and Reform Commission in Beijing is examining the impact of a carbon tax on the nation's economy and the relationship between such a measure and emissions markets, according to Wang Shu, a Beijing-based official in the commission's Department of Climate Change.

“We will focus on carbon trading,” he said by phone on February 25. “We don't think we will implement a carbon tax immediately.”

Pravin Gordhan, South Africa's finance minister, said February 27 the nation will introduce a carbon tax in January 2015. A review on its implementation will be made jointly with industry stakeholders this month, Gordhan said.

Hybrid model

One option that may be considered in the US is a hybrid model where a tax converts into a carbon market in future years, similar to a program in Australia, Prell said. Whether the China announcement will prod the US toward that model is yet unclear, he said.

Debate in the US about a carbon tax is still “at its infancy,” Prell said. “As part of integrating a carbon tax into the fiscal debate, the Democrats appear to be overly cautious and the Republicans overly reckless in not including it.”